ALBANY, Ga. -- It is, perhaps, unfortunate that the very name of the district created by Albany officials in 2008 to encourage development in certain areas of the city that, on their own, likely would not have seen improvement carries with it a stigma that generates an automatic negative knee-jerk response with some.

Tax Allocation District.

Despite the can't-lose fail-safe nature of the economic development tool, many citizens see the word "tax" and are immediately leery.

"It's really disheartening that this is a concept that some people just don't get," Albany City Manager James Taylor said of the TAD approved by city voters in 2008 and OK'd by the state Legislature during its 2009 session. "We've tried our best, but I really don't know how to make folks understand. One thing I do know is that you can't explain it in sound bites, not so that the general public gets it.

"But this is one of those economic tools we added to our toolbox that gives us an opportunity to bring development into areas that badly needed it. The beauty of the TAD is that it only utilizes taxes on property that has increased in value. It takes nothing away from the tax digest, and if we don't really do anything with it, we don't lose anything."

Albany's tax allocation district -- which encompasses most of the city's downtown business district from the Flint River north to Society Avenue, south to Mercer Avenue and west to Van Buren Street; extends eastward to land along Oglethorpe Boulevard and south on Radium Springs Road to include Albany State University and land along the East Albany sand dunes; to a region adjacent to the MillerCoors Brewery that includes the newly constructed Wal-Mart SuperCenter -- generated no income in its first year of existence, as expected.

But the TAD, which utilizes only new taxes created by increased property values within the district, has shown steady growth since. It brought in $6,880 in revenues in 2010, $20,957 in 2011, $101,133 in 2012 and $218,090 in 2013. City Finance Director Kris Newton points out that the $347,060 in tax revenue, none of which has yet been spent by the Albany-Dougherty Inner City Authority, which serves as the conduit through which the funds will be utilized, is not yet a windfall waiting to be used.

"An intergovernmental agreement (between the city and ADICA) requires that legal fees used to form the TAD in 2010 as well as (other interest payments) will be paid back as the revenue increases," Newton said. "As of now, the TAD actually owes the General Fund for the $176,866 difference in revenue and expenses."

TRANSFORMING THE DISTRICT

Downtown Manager Aaron Blair, who also serves as president/CEO of ADICA, said the exponential growth of the fund, which currently relies heavily on new taxes generated by the East Albany Walmart and the Homerun Foods store on Oglethorpe, could become significant enough to generate transformative development within the district.

Carlton Fletcher

Workers install trusses Friday at the site of a new Liberty gas station under construction on Oglethorpe Boulevard. The business falls within Albany's tax allocation district and will bring in new tax money for redevelopment in the district.

"I think now that Walmart is established, Homerun Foods has become a full-blown contributor to the TAD (businesses pay only property taxes in their first year), a Liberty gas station is being built in the district and there is talk of a Dollar General store going up soon, we could potentially see significant growth in the next two years," Blair said. "But it's not just the new businesses generating TAD revenue.

"Some of the property owners downtown are doing $40,000 projects here and $40,000 projects there. Together they all add up."

Blair said the million-dollar mark will be an important milestone.

Carlton Fletcher

The Homerun Foods store on Oglethorpe Boulevard is one of a few new businesses contributing tax funding to the city of Albany's tax allocation district. The funding will be used solely for redevelopment within the district.

"I think the TAD collections are going to continue to go up steadily," he said. "Once we hit the $1 million mark, then I think you'll see an even steeper climb. Once we get there, then there will be an opportunity for substantial reinvestment, the kind that can really transform the district."

Taylor was serving as an assistant city manager when he conducted research into state tax allocation districts. He brought his research to then-City Manager Al Lott, who gave the go-head to investigate further.

"It was a two-year process just getting the thing off the ground," Taylor said. "We had to get it on our ballot, sell it to the citizens and then get it OK'd by the General Assembly. The biggest challenge was getting the public buy-in because it was such a new concept and a lot of people didn't understand it. Several other cities in the region had tried to create a TAD but their vote failed.

"Once the ballot initiative passed, we also had to get a buy-in from the other taxing entities -- the county and the School Board. They were impacted, too. But we saw this as another tool we could put in our toolbox to help develop areas that, frankly, weren't likely to be developed without incentives."

Taylor said the boundaries of the TAD became a vital part of the process.

"One of the major challenges was that the district had to be contiguous," the city manager said. "It couldn't be a little bit here and a little bit there. We looked at some of the areas of the city that could benefit most: There was talk of tearing down the old Heritage House (hotel), and we knew that area could become valuable; there was land around Phoebe (Putney Memorial Hospital) that offered development opportunities; we looked at the area around the sand dunes, and there was talk of a Walmart coming to East Albany.

"One of the things I don't think people quite understand is that the TAD, and the designation of parts of East Albany as a Military Zone, probably had a lot to do with Walmart finally coming here. They were hot and cold on the idea -- they had a store just across the line in Lee County, so it wasn't like there wasn't one close -- but the TAD and the Military Zone gave them the opportunity to utilize tax credits. I don't know if that was the thing that ultimately led them to move forward with the project, but it didn't hurt."

STIMULATING INVESTMENT

Blair said that while some cities use tax allocation districts to directly fund economic development projects or even to partially fund residential development, his and ADICA's plans are to use the funding generated by the TAD to stimulate private investment in the district.

"I've seen these kind of development districts used before, and they're one of the better methods for redevelopment," the downtown manager said. "I've seen communities have tremendous success with these special tax districts, and they come with very little risk.

Carlton Fletcher

The East Albany Wal-Mart superstore is the major contributor to Albany's tax allocation district. City officials say passage of legislation that created the TAD was a factor in the retailer building the store in Albany.

"We feel that we can best use the funds generated to incentivize private investment in the district."

Newton, though, warns that the city's TAD is not likely to continue its current growth relying solely on a couple of businesses.

"The Eastside Walmart is carrying the weight right now, but it seems unlikely it can do the job on its own," she said. "We are hopeful that as the economy recovers, one of the developments in the downtown area will become viable and begin to really contribute money ... to make a real difference. If we can generate enough extra property tax revenue from real growth and improvements, then there would be seed money for incentivizing developers to take on the big projects that could bring back downtown.

"I am cautiously optimistic, but it would take private-sector investment for a change. Local government can't -- and, I think, shouldn't -- do it all."